State of New York ex rel. Ken Elder v. JPMorgan Chase Bank, N.A.

Background

Ken Elder, acting as a plaintiff-relator for the State of New York, brought a New York False Claims Act case against JP Morgan Chase Bank, N.A. in New York state court. Elder alleged that the bank engaged in a multiyear scheme involving abandoned cashier’s checks and retained the use and benefit of tens of millions of dollars that should have been transferred to New York under the state’s Abandoned Property Law. Elder alleged that the bank falsely claimed the checks were subject to transfer to Ohio instead.

The bank removed the case to the U.S. District Court for the Southern District of New York, asserting federal-question jurisdiction. Elder moved to remand, meaning to return the case to state court, and also requested attorneys’ fees and costs resulting from the removal.

Federal Jurisdiction and Remand

The court applied the well-pleaded complaint rule, which generally permits removal only when a federal question appears on the face of the plaintiff’s properly pleaded complaint. The court found that Elder asserted only New York-law claims and did not allege a cause of action created by federal law.

The bank argued that the claims necessarily raised a federal issue concerning which state had priority to receive the abandoned cashier’s checks. The court considered the four requirements for the narrow federal-question exception recognized in Grable: the federal issue must be necessarily raised, actually disputed, substantial, and capable of resolution in federal court without disrupting the federal-state balance.

The court held that the bank could not satisfy the first requirement because Elder’s claims did not necessarily raise a federal issue. Even if Elder would need to address whether New York had priority over Ohio, that issue would arise only if the bank asserted federal preemption as a defense. A federal defense, including preemption, ordinarily does not create federal-question jurisdiction. The court also concluded that the claims could be resolved without reaching federal issues.

Because the bank failed to show that federal-question jurisdiction existed, the court concluded that it lacked subject-matter jurisdiction. It therefore granted Elder’s motion to remand and ordered the case returned to the Supreme Court of the State of New York, County of New York.

Attorneys’ Fees and Costs

Elder separately sought attorneys’ fees and costs under 28 U.S.C. § 1447(c). Although the court lacked jurisdiction over the underlying case, it retained jurisdiction to decide the fee request.

The court denied the request. It found that the bank had an objectively reasonable basis for removal because it had raised colorable arguments about federal jurisdiction, and a federal court had accepted similar arguments in another related case. The court therefore concluded that the lack of jurisdiction was not obvious from the removal petition.

Disposition

The motion to remand was GRANTED. The motion for attorneys’ fees and costs was DENIED. The Clerk of Court was directed to close the federal case after remand.